Trade Like Chuck: How to Create lncome in ANY MARKET!
By Chuck Hughes
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About this ebook
The Legacy Publishing Team
Welcome to the exciting world of stock market investing! Your Legacy Publishing Team has a combined total of over 60 years of investing experience and more t
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Book preview
Trade Like Chuck - Chuck Hughes
Chapter 1 PowerTrend Investing
In this Chapter we are going to explore the PowerTrend system that can help select stock and ETF trades with the best profit potential. PowerTrend has a long history of profitability in any type of market condition. This simple but powerful strategy uses a trend following system that tells us if we should be buying or selling stocks.
The concept behind trend following is very simple. When the trend is up, we buy stocks. When the trend is down, we sell stocks.
PowerTrend is universal in nature and has a long history of profitability in a broad spectrum of investments including stocks, Exchange Traded Funds (ETFs), stock indexes, fixed income investments, mutual funds, sector funds, commodities and currencies.
Two-Tiered Approach
With decades of investing experience, we have found that investing with the trend when used in conjunction with risk management is the best overall approach for profitable investing. This two-tiered approach has worked well in all types of markets and has stood the test of time.
In 2008 during the worst financial crisis since the Great Depression, PowerTrend not only signaled to exit stocks, it also produced enormous profits from short positions and turned wealth destruction into wealth creation.
During the last bear market, the broad based S&P 500 Index lost 56% of its value but then staged a powerful comeback with a 171% rally more than doubling its value.
During this powerful comeback rally, the airwaves were cluttered with negative opinions about the outlook for the stock market. Pundits warned of double dip recessions, slow growing global economies, the European debt crisis, quantitative easing by the Fed and the rise of gold to $3,000 an ounce with the impending boom in inflation.
If you had heeded these negative forecasts you would have missed out on the 171% rally in stocks and what could be one of the most powerful rallies in our lifetime. PowerTrend not only profited when it went short stocks in 2008 but it also reversed and bought stocks in the Spring of 2009 and has captured most of the comeback rally in stocks since then.
We think the average investor is much better served by following a simple trend following system like PowerTrend than listening to the forecasts of analysts and market gurus.
To the average investor the stock market can seem complicated and confusing. Stocks can go up or down for no apparent reason. Apple reports great earnings but the stock plummets. The price of oil drops and the inflation report is tame but the major stock market indexes dive. Pfizer reports terrible earnings but the stock rallies. The Friday Employment Report is dismal but the Dow Jones Industrial Average soars.
When it comes right down to it, the reason why stock prices are going up or down seems to be anybody’s guess. You might as well try to read tea leafs.
Highly paid analysts would have us believe that a company’s fundamentals drive stock prices. Yet how many times have you seen the stock of companies with good fundamentals crash while those with terrible fundamentals soar?
But none of that matters for one simple reason. At the end of the day, if there are more buy orders than sell orders the price of the stock will go up. And if there are more sell orders than buy orders, then the price of the stock will go down. It’s just that simple. Everything else is just noise.
Successful trade selection can be reduced to two simple rules:
Buy investments if the buying pressure exceeds the selling pressure
Sell investments if the selling pressure exceeds the buying pressure
To make real money in the market you don’t need to know why a stock price rises or falls, you just need to know in advance which way it’s most likely to go. If you can quantitatively measure the buying and selling pressure of a stock using a trend following system, then you will know in advance whether the price is likely to rally or decline.
Follow the Price Trend Instead of Trying to Predict It
The truth is that it is very hard to try to predict the future with any type of consistency. We learned early in our investing careers that it is better to invest with the trend than trying to predict the trend.
One of the most effective ways to measure the price trend is to use technical analysis to quantitatively measure the price movement of a stock. Technical analysis is a market discipline that quantifies stock price movement with the goal of identifying repetitive price